Using Job Changes to Evaluate the Bias of the Value of a Statistical Life

40 Pages Posted: 11 Sep 2007

See all articles by Hannes Spengler

Hannes Spengler

ZEW – Leibniz Centre for European Economic Research - International Finance and Financial Management

Sandra Schaffner

RWI - Leibniz Institute for Economic Research

Date Written: June 2007

Abstract

This paper presents a new approach to obtain unbiased estimates of the value of a statistical life (VSL) with labor market data. Investigating job changes, we combine the advantages of recent panel studies, which allow to control for unobserved heterogeneity of workers, and conventional cross-sectional estimations, which primarily exploit the variation of wage and risk between different jobs. We find a VSL of 6.1 million euros from pooled cross-sectional estimation, 1.9 million euros from the static first-differences panel model and 3.5 million euros from the jobchanger specification. Thus, ignoring individual heterogeneity causes overestimates of the VSL, whereas identifying the wagerisk tradeoff not only by means of between job variation (job changer model) but also on the basis of noisy variation on the job (panel models) may lead to underestimates of the VSL. Our results can be used to perform cost-benefit analyses of public projects aimed at reducing fatality risks, e.g., in the domains of health, environmental or traffic policy.

Keywords: Value of a statistical life (VSL), compensating wage differentials, work accidents, job changes

JEL Classification: I10, J17, J28, K00

Suggested Citation

Spengler, Hannes and Schaffner, Sandra, Using Job Changes to Evaluate the Bias of the Value of a Statistical Life (June 2007). Ruhr Economic Paper No. 14. Available at SSRN: https://ssrn.com/abstract=1012090 or http://dx.doi.org/10.2139/ssrn.1012090

Hannes Spengler (Contact Author)

ZEW – Leibniz Centre for European Economic Research - International Finance and Financial Management ( email )

Postfach 103443
Mannheim, D-68034
Germany
+49 621 1235 284 (Phone)

Sandra Schaffner

RWI - Leibniz Institute for Economic Research ( email )

Hohenzollernstr. 1-3
Essen, 45128
Germany

HOME PAGE: http://www.rwi-essen.de/schaffner

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